September 2, 2016
Mortgage Rates were steady to slightly higher today, depending on the lender--a relative victory considering the potential volatility associated with today's jobs report. Though bigger bullets may have been dodged, the lack of improvement means rates remain near their highest levels in several weeks--potentially on the verge of the next "directional trend." What's a directional trend? Just a fancy way of labeling the phenomenon where rates are moving either higher or lower fairly consistently. In stark contrast, the past 2 months have been almost completely directionless--a "sideways trend" if you will.
When it comes to financial markets, these sorts of sideways trends--especially those that bring rates into an increasingly narrow range--tend to resolve with the beginning of the next big push higher or lower. At the moment, rates are just on the upper edge of exactly that sort of consolidative range. That makes it just a bit more likely that the inevitable "next move" will be toward higher rates.
We'll cross that bridge when/if we come to it though. For now, even at the highest recent levels, rates are still exceptionally low in a historical context. Most lenders continue quoting conventional 30yr fixed rates of 3.375-3.5% on top tier scenarios.
Loan Originator Perspectives
Jobs report was a little weaker than expected which usually results with bonds holding ground or rallying. I am not a fan of locking on Fridays, and especially not a fan of locking on a Friday ahead of a 3 day weekend. If you floated into today's data, I would float to Tuesday and evaluate pricing then. -Victor Burek, Churchill Mortgage
We wondered if August's NFP report would motivate bonds out of their narrow trading range, and the answer was NO. The report missed expectations slightly, but rates still rose a bit. Bond trading desks were likely abandoned by noon, and any movement this PM should be inconsequential. We are now near the top of our 1.50-1.60% treasury range, if it remains intact, pricing next Tuesday may improve, at least marginally. Lock/float still remains a toss up, but only float if you won't lose sleep worrying about your rate. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.375 - 3.5%
- FHA/VA - 3.0 - 3.25%
- 15 YEAR FIXED - 2.75%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- In the biggest of pictures, "global growth concerns" remain the driving force behind the long-term trend toward lower rates
- Amid that trend, periodic corrections toward higher rates can and will happen. These can happen for no apparent reason, or they can be brought on by changes in expectations surrounding central bank policy at home and abroad, as well as geopolitical and systemic risks
- Time horizon and risk tolerance are 2 variables to consider when it comes to locking. If you have plenty of time and don't mind losing some ground, set a limit as to how much higher rates could go before you'd lock to avoid further losses, and then float in the hopes of never seeing that limit.
- In the shorter-term, it's always good to look for lock opportunities after rates have been moving lower or sideways repeatedly, especially if they've since begun to move back up in any sort of consistent way.
- As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.' Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy. It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).